Through this course, you will start by addressing the two “big questions” of accounting: “What do I have?” and “How did I do over time?” You will see how the two key financial statements – the balance sheet and the income statement - are designed to answer these questions and then move on to consider how individual transactions aggregate to make up these financial statements. After developing a broad understanding of accounting and financial statements, you will begin to develop a more nuanced understanding of individual components of doing business, such as making a sale or building inventory. By considering many of the more common actions of a company, you will build your understanding of accounting, and explore these concepts by applying them across various types of transactions. Once you understand these individual concepts better, you will be ready to return to the overall financial statements and use them as informational tools, including building ratios.
You can do this course standalone or to qualify for the residential component of the Finance for Strategic Decision-Making Executive Education program. For more information, see the FAQ below.

Revisiones

WG

Very good course (of course on a basic level - do not expect too much if you are familiar with accountings), I really liked the professor.

VB

May 15, 2020

Filled StarFilled StarFilled StarFilled StarFilled Star

Very Well designed course and interesting !!!\n\nProf. Greg Miller explains the concepts very lucidly.

De la lección

Ratios and Course End Assessment

We have covered a lot of ground. You now are familiar with financial statements and the underlying transactions that create them. Our goal is to help you use accounting to make decisions and you have surely gotten much better at that. Now we get the big payoff - we learn how to build ratios to provide insights regarding the decisions we are making (maybe even to help us decide what types of decisions we should consider). We have seen a few ratios as we went through the course, but in this module we are going to discuss how to go about making your own ratios related to whatever question you want to answer. I think you will be surprised to find how easy it is now that you understand accounting. In fact, it is so easy that it will be just a couple of short lessons.

Along with those short lessons, the rest of the week can be used to prepare for and take the final comprehensive exam. It will go back over material from each module to assure that you can pull it all together.

Impartido por:

Greg Miller

Transcripción

Welcome. In this video, we're going to discuss ratios that are composed of a stock over a stock. These ratios are going to give us a better understanding of where we are right now. Many ratios examine the relationship of one stock to another. One way to economically interpret this is to think of them as comparing how much of an item of value you have relative to some claims on your company, or relative to some claims on the use of those items. Another way to think of this is that we could do a stock over stock video to give us the relative composition of some aggregate stock number. Let me give you an example of the first one, the value compared to claims. Somebody might ask you a question like, will we be able to fulfill our upcoming obligations? Now, what you'll do is draw on your knowledge of accounting to think about what information do I have to answer that. You can say to yourself, well, my upcoming obligations, those must be my current liabilities. What do I have that I can use to fulfill those current liabilities? Well, I could use my cash and my marketable securities to do that. Those are both the items that will turn into cash pretty quickly. If you do this, you've created a ratio to answer that question that people asked. Some people will call this the quick ratio. In fact, we've called it that in earlier videos, but other people might have different names for it. You don't want to get too caught up on the name. The important thing is if somebody asks a question, will we be able to fulfill our upcoming obligations? We put together a ratio using our knowledge of accounting to answer that question. Let's move on to the other way that we could think of combining stock and stock. That's the relative composition of some stock numbers. So, imagine that somebody came to you and said, how reliant on are we on our equity holders for funding? Well again, you could apply your understanding of accounting and say, well, how much funding do our equity holders give us? That's our equity number. Then you can say, well, what other ways do we get assets? Well, I can use the balance sheet equation to figure that out. Assets equals liabilities plus shareholders equity, so the other way we get funding must be liabilities. We could just pick up our debt for that. So, we've put our debt over equity, and that's going to give us some sense of how much debt do we rely on for each dollar of equity we've had put into the firm. A lot of people would call that the debt to equity ratio. I know that's really a creative name. Some people will give it a different name, some people call that leverage. I don't really care what you call it, and in fact I want to warn you, I think I've seen about 15, maybe 30 different formulas for leverage and everybody is sure that the formula they're using is what they call leverage. So, we're back to the sink, don't get too hung up on the name. The important thing here is, somebody asks you a question, and you realize I can put together two stock numbers into a ratio to give me the insights on that. There's a whole bunch of other ways you can combine stock and stock. In fact, if there's an infinite number of questions out there, there's probably an infinite number of ways you can combine stock and stock to answer them. You just need to keep following this same thought process.